kiribati public procurement reform … kpprp concept paper.pdf · 4.2.2 chief procurement officer...

KIRIBATI PUBLIC PROCUREMENT REFORM PROGRAM

(KPPRP)

CABINET CONCEPT PAPER

APRIL 17, 2017

MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT

(MFED)

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TABLE OF CONTENTS

ACRONYMS .............................................................................................................................. 2

1. KPPRP BACKGROUND ........................................................................................................ 3

2. KPPRP SCOPE ..................................................................................................................... 3

2.1 KPPRP Overview ................................................................................................................. 3

2.2 KPPRP Design Principles: ................................................................................................... 4

2.3 KPPRP Additions: ................................................................................................................ 4

2.4 KPPRP Exclusion: ................................................................................................................ 4

2.5 KPPRP Costs and Benefits: ................................................................................................. 4

3. KPPRP OUTCOME ............................................................................................................... 5

4. KPPRP OUPUTS ................................................................................................................... 5

4.1 Procurement Legislation: ...................................................................................................... 5

4.2 Organisational Changes: ...................................................................................................... 6

4.2.1 Central Procurement Unit (CPU): ............................................................................... 6

4.2.2 Chief Procurement Officer .......................................................................................... 6

4.2.3 Central Tender Board (CTB): ..................................................................................... 6

4.2.4 Bidder Appeal Tribunal (BAT):.................................................................................... 6

4.3 Staff and other Stakeholders: ............................................................................................... 6

4.4 Procurement Systems: ......................................................................................................... 7

4.4.1 Development of an “Procurement e-portal”: ................................................................ 7

4.4.2 Establishing a Supplier Database ............................................................................... 7

5. IMPLEMENTATION PLAN AND SCHEDULE ....................................................................... 7

5.1 Implementation Plan: ........................................................................................................... 7

5.2 Schedule: ............................................................................................................................ 8

5.2.1 Budgetary Support Triggers (2017-18) ....................................................................... 8

5.2.2 Other Short Term Activities (2017-18) ........................................................................ 8

5.2.3 Medium Term (2019-20) ............................................................................................. 8

5.2.4 Long Term 2021 ......................................................................................................... 8

ANNEX A – KEY PROCUREMENT REFORMS UNDER THE KPPRP...................................... 9

1. LEGISLATION ....................................................................................................................... 9

2. ORGANISATION AND STAFF ..............................................................................................10

3. SYSTEMS .............................................................................................................................12

ANNEX B-1 PROPOSED PROCUREMENT ORGANISATION CHART ................................14

ANNEX B-2 CURRENT AND FUTURE GOVERNANCE FOR CONTRACTS .........................15

ANNEX C STAKEHOLDERS IN THE KPPRP ....................................................................16

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ACRONYMS

$AUD Australian Dollar

ADB Asian Development Bank

AG Account General

ATG Attorney General

BAT Bidder Appeal Tribunal

CEO Chief Executive Officer (SOE)

CPO Chief Procurement Officer

CPRB Central Procurement Review Board

CPU Central Procurement Unit

CTB Central Tender Board

DP Development Partner

FMIS Financial Management Information System

GoK Government of Kiribati

KFSU Kiribati Fiduciary Services Unit

KPI Key Performance Indicator

KPPRP Kiribati Public Procurement Reform Program

KPPRP-SC KPPRP Steering Committee

LC Leadership Committee

MCIC Ministry of Commerce, Industry and Co-operatives (MCIC)

MFED Ministry of Finance and Economic Development

MFED-IA MFED – Internal Audit

MoP Method of Procurement

MPRC Ministry Procurement Review Committee

MSME Micro, Small and Medium Enterprises (MSMEs).

PE Procuring Entity

P3 Public Private Partnership

SBDs Standard Bid Documents

SPP Sustainable Public Procurement

SOE State Owned Enterprise

TA Technical Advisor

TORs Terms of Reference

UNCITRAL United Nations Commission on International Trade Law

VfM Value for Money

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1. KPPRP BACKGROUND

Based on 2016 estimates, the Government of Kiribati (GoK) spent approximately $AUD150 million

for the goods, works and services required to support the GoK’s operational and capital

objectives1. Approximately 50% of this funding is from GoK’s development partners (DPs), and is

conducted in accordance with the DPs’ processes; the balance is funded in part by DPs and

majority by GoK and is governed by the Public Procurement Act 2002. Several internal and

external assessments since 2011, the latest being 2016/17, have found the GoK’s procurement

process under the Act need reform. Areas for improvement are in the categories of legislation,

organisation, systems and staff.

As part of GoK’s ongoing public financial management reform program, the Ministry of Finance

and Economic Development (MFED), with support from the Asian Development Bank (ADB), has

led the drive to address the required improvements in public procurement. This has resulted in

the Kiribati Public Procurement Reform Program (KPPRP).

This Cabinet Concept Paper (Paper) seeks Cabinet support to commit to the KPPRP principles

for improving GoK’s public procurement process (a requirement for the 2016/17 Budget Support).

In addition, this Paper outlines ‘trigger points’ related to KPPRP to be agreed with DPs to release

part of their budgetary support contributions for 2017/18.

2. KPPRP SCOPE

2.1 KPPRP Overview: The KPPRP is a five-year program (2017-2021) designed to address

procurement deficiencies for all purchases that are subject to the GoK’s Procurement Act 2002.

Currently this is approx. 50% of total annual purchases ($AUD75 million based on 2016

estimates). This includes all purchases made by all GoK’s ministries and state-owned enterprises

(collectively termed ‘Procuring Entities’ – PEs) funded by GoK, and in part its DPs.

The procurement process is as follows:

1 It should be noted that, given the limitations of the GoK’s accounting systems, this is a high-level estimate.

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2.2 KPPRP Design Principles: The KPPRP is based on the proven international best policies

and practices, as reflected in the United Nations Commission on International Trade Law

(UNCITRAL) Model Law on Public Procurement 2011. However, given the unique challenges of

Kiribati, adjustments will need to be made to this model and policies will have to be developed as

noted in this Paper. In addition, the models and reform processes of Kiribati’s neighbouring Pacific

Island States have been examined, including those of Fiji, Tonga and Tuvalu and should be

considered as part of the KPPRP.

2.3 KPPRP Additions: The KPPRP provides focus for PEs to re-examine their non-core activities

currently performed by PE staff. Examples are cleaning, security, catering, and others. This could

create opportunities for part, or full, outsourcing to the private sector for some functions. If

correctly handled this can result in win-win results for both the PEs (cost reductions, improved

quality, etc.) and the private sector (building capacity to offer to clients beyond GoK). There are

successful examples from the Ministry of Health and Medical Services. In addition, while to date

their use has been limited, Public Private Partnerships (P3s) can offer GoK some opportunities in

the future and are included in the KPPRP. Given the interrelationship between procurement and

inventory management, including surplus/obsolete disposal, the KPPRP includes these functions.

2.4 KPPRP Exclusions: The KPPRP does not address purchases made using DPs’ funds and

subject to DPs procurement systems. These systems are well proven and as structured provide

DPs with assurances required by their policies. Until GoK’s procurement process is acceptable to

DPs (a long-term goal of the KPPRP) this is likely to continue. However, within MFED is the

Kiribati Fiduciary Services Unit (KFSU) that provides dedicated fiduciary support to projects

funded by DPs and oversees the purchases (goods, works and services) using the DPs

procurement processes. To take advantage of staff synergies and procurement knowledge, the

proposal is to position a new Central Procurement Unit (CPU), described later in the Paper, to

conduct GoK’s procurement within the MFED.

2.5 KPPRP Costs and Benefits: The costs of the KPPRP are to be shared by GoK and the DPs.

The highest costs are those related to the long and short term technical advisors (TAs) required

during 2017-19 by for MFED to establish the CPU, for the Attorney General (ATG) to draft

legislation, and for the Accountant General (AG) to conduct procurement ‘value for money’ (VfM)

audits. In addition, there will be costs for training and study visits for key GoK staff. Discussions

are underway with DPs regarding their contributions. All other costs related to the salaries of GoK

staff, office space and equipment will be absorbed by GoK.

As the KPPRP develops, results will be seen in improved best value for purchases and staff

saving in PEs reflecting the centralisation of the procurement service. In monetary terms, based

on experiences in other countries, this could amount to a 10 -15% reduction in total purchase

costs together with other improvements in ‘best value’. The KPPRP is designed to take early

advantage of relatively uncomplicated changes including the purchase consolidated purchases

of goods, works and services, now purchased separately by each PE.

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3. KPPRP OUTCOME

The KPPRP will deliver all procurement, governed by GoK’s procurement legislation, by an

efficient, fair, transparent and ethical process that results in ‘best value’ for the GoK, the people

of Kiribati, and other stakeholders. ‘Best value’ for the purposes of the KPPRP is defined as the

optimum combination of price, quality, whole-of-life costs, delivery, and social, economic and

environmental considerations. Similarly, inventory management (including stores and disposal)

will be conducted in the most efficient and cost-effective manner.

4. KPPRP OUPUTS

The KPPRP will progressively make changes to current legislation, introduce current best

practices and reflect the unique demands of Kiribati. Supporting these changes will be a need to

make organisational changes and reassignment of roles and consequently develop the capacity

of staff and e-Systems to affect the revised processes. Similarly, a wide range of stakeholders,

both within and outside of the GoK, will be involved in the KPPRP including the AG, MFED-Internal

Audit (MFED-IA), the Kiribati supply community, the PEs and GoK’s DPs. GoK’s ministries that

have policy interrelationships with procurement will be directly involved. This would include the

Ministry of Commerce, Industry and Co-operatives (MCIC) responsible for building the capacity

of micro, small and medium enterprises (MSMEs). A summary of outputs is provided below. For

details of the changes – refer Annexes A, B-1, B-2 and C.

4.1 Procurement Legislation: To accommodate both the changes required under the 2011

UNCITRAL Model Law and those required to reflect GoK’s unique requirements, a new

procurement bill is planned together with accompanying regulations, standard bid and contract

documents, new templates, and a working-level procurement manual. In addition, the 2011 Stores

Regulations will be updated. Thus, there will be a full suite of legal and policy documents laying

the solid foundation for purchases and inventory management. The key changes are:

• Annual procurement planning, e-Procurement, P3s, full transparency of the procurement

process, clear criteria for restricting bidder participation and, Sustainable Public

Procurement (SPP) that includes economic, social and environmental considerations

• Establish a CPU for purchases over $AUD 10,000 (suggested)

• Position Chief Procurement Officer (CPO) role within MFED – CPU

• CPU addresses procurement and inventory management policy and capacity building

• PEs will purchase requirements up to $AUD 10,000

• One level of contract award authority – Central Tender Board (CTB)

• Bidder Appeals Tribunal (BAT) – an independent body to handle a time-bound process

• Contract management – post award roles and responsibilities defined

• Suppliers with unfair advantage not permitted to bid (e.g. SOEs vs. private sector)

• Outreach, regarding GoK’s procurement, to supply community, civil society and media

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4.2 Organisational Changes: These reflect the principles of both centralising common activities

to build professional capacity and, at the same time, ensuring the appropriate separation of duties.

The key new entities and functions are detailed in Annexes B-1 and B-2 and key changes are

summarised as:

4.2.1 Central Procurement Unit (CPU): will be in MFED and will have policy responsibilities for

all purchases and inventory management and operational responsibilities for all purchases (on

behalf of PEs) above $AUD10,000 (suggested threshold). The CPU will consolidate ‘common’

purchase of goods, works and services now bought separately by PEs. In addition, the CPU will

provide Secretariat support to the CTB and have other duties as detailed in Annex B-1.

4.2.2 Chief Procurement Officer (CPO): currently the CPO, appointed in accordance with the

Procurement Act, is the Secretary of the Cabinet, who also chairs the Central Procurement

Review Board (CPRB). It is unusual to have the position of the CPO so high within a government.

In addition, there should be separation of duties for the CPO’s policy role and that of subsequent

approval. The proposal is now to move the CPO role to a position within MFED. In the long term,

this will require a new Act to give this position powers to affect procurement decisions, in the

interim however, the CPO is more appropriate to sit under the powers of the Financial Secretary.

4.2.3 Central Tender Board (CTB): There are currently several levels for policy deviation and

contract award approval as detailed in Annex B-2. This KPPRP proposes that policy deviation for

purchases over $AUD 10,000 will be handled by the CPO. However, all contracts over this value

threshold will be approved by the CTB. Incidentally, the current high volume of small value

purchases (now made by PEs) will decline, based on consolidated purchases by the CPU as the

KPPRP develops.

4.2.4 Bidder Appeal Tribunal (BAT): A key element of a transparent procurement process and

an anti-corruption tool, is a mechanism for appeal by bidders. Bidders, believing the procurement

process defined in the Act was not followed by the GoK, would have the right to appeal under a

time bound process. Initially the appeal is to the PE/CPU and, if not satisfactorily resolved, the

bidder can submit to a more independent tribunal. There are several models for this and further

discussion within GoK is required to determine the best approach.

4.3 Staff and other Stakeholders: Given the current limitations of procurement expertise, both

within GoK and the Kiribati labour market, the KPPRP will initially rely on short and long-term

international Technical Advisors. The GoK staff taking on new roles in the CPU and CTB will

need intensive training. In the short to medium term, PEs will continue to conduct procurement

until the capacity in the CPU develops. Similarly, the Ministry Procurement Review Committees

(MPRC) and the Central Procurement Review Board (CPRB) will continue their roles pending the

establishment of the CTB. Thus, all GoK staff involved should receive procurement training to

improve short term ‘best value’ results. Terms of reference are required for the MPRC and CPRB.

In addition, the KPPRP will affect a considerable number of public procurement stakeholders,

both within GoK and outside. Their contributions and/or understanding of the reforms will be

required. A full listing of such stakeholders and their KPPRP roles are detailed in Annex C.

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4.4 Procurement Systems: Apart from a few PE systems that include Excel spreadsheets and

M-Supply (for MHMS), there is currently little systems support for procurement and inventory

management. In the longer term GoK should develop a full e-procurement/inventory strategy to

support full control over activities, including identification of potential areas of risk (e.g. corruption),

non-compliance, opportunities for improvement as well as to reduce purchase process costs. GoK

should consider the e-procurement software (In-Tend) offered by ABD. Such systems would be

integrated into the other systems developing in GoK. For example, the new Financial

Management Information System (FMIS) (to replace Attaché) under consideration by MFED and

ADB. The pace of moving to e-Procurement will be governed by the changes in MFED’s FMIS,

Kiribati’s internet services, and the increased usage by the national supply community. Additional

details of systems reform refer Annex A.

In the short term, there are several activities that should be completed:

4.4.1 Development of an “Procurement e-portal”: as part of the MFED website. This would be

used, in addition to the traditional media, for the publication of key procurement legislation and

data including bid opportunities, contract awards, results of bidders’ appeals and the list of

suspended suppliers (see below). This small step will offer significant improvement to the

transparency deficiencies now existing in Kiribati. An international portal should also be selected

that best suits GoK’s needs and all PEs instructed to use.

4.4.2 Establishing a Supplier Database: this initially can be Excel based list, and available to

all PEs, of suppliers qualified to sell to GoK. It will be used by CPU/PEs to ensure all sources of

supply are considered, especially where limited bids are solicited. Plus, it can be used to record

suppliers’ performance on contracts, and identify suppliers ‘suspended’ (against defined criteria)

from participating in GoK’s invitations to bid.

5. IMPLEMENTATION PLAN AND SCHEDULE

5.1 Implementation Plan: Given the scope of the KPPRP, it will be phased over five years (2017-

21) and led by the CPO, reporting to the KPPRP Steering Committee (KPPRP-SC), (ToRs to be

developed), with members from:

• MFED (Chair)

• Attorney General

• Major spending PEs + associated SOEs i.e. Public Works and Utilities, Ministry of Education

and Ministry of Health and Medical Services

• Ministry of Commerce, Industry and Cooperatives

• Kiribati Chamber of Commerce and Industry

• Development Partners (as required)

• CPO - as the project manager of the KPPRP

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5.2 Schedule: The initial schedule is as follows, and should be revisited each year to reflect

changes to scope, etc. The key 2017-18 dates noted here are offered by GoK to the DPs to be

used as ‘triggers’ for budgetary support.

5.2.1 Budgetary Support Triggers (2017-18)

Formation and kick off meeting of KPPRP – SC – June 2017

Approval of this Concept Paper by Cabinet – June 2017

CPU formed and staffed, including TA – end September 2017

New Procurement Act receives assent – first quarter 2018

e-portal (using MFED website) – first quarter 2018

Procurement and Inventory Management regulations, standard bid documents, procurement

manual published – September 2018

5.2.2 Other Short Term Activities (2017-18)

ToRs for all TAs (CPU, ATG and AG) to be developed

ToRs to be developed for MPRC and CPRB

Procurement training for staff (CPU, CTB, Evaluation Committees, MPRC, CPRB, PEs)

Explore professional procurement certification for all procurement staff

Stakeholder consultations, especially domestic supply community on planned changes

Pilot Procurement planning with key PEs for 2018 – select purchases for CPU to handle

Identify and develop procurement strategies for common purchases: e.g. travel, vehicles,

stationery supplies, etc. and award at least 3 contracts for consolidated common purchases

Design and staff the Bidder Appeals Tribunal

Develop contacts with public procurement agencies/ministries in Region

Issue of first CPU annual report

Auditor General’s office starts procurement Value for Money (VfM) audits

5.2.3 Medium Term (2019-20)

MFED – IA starts procurement VfM audits

All PEs conduct annual procurement planning

All common purchases consolidated and contracts awarded.

CPU expands role to take on (from PEs) more purchases over proposed $AUD 10,000

Develop e-procurement strategy and schedule

Procurement Key Performance Indicators (KPIs) developed/monitored

Regular outreach programs conducted for supply community, civil society and media.

Actively participate in Regional public procurement fora.

Issue annual CPU report

5.2.4 Long Term 2021

All procurement over agreed threshold (proposed at $AUD 10,000) conducted by CPU

e-procurement program in place and first phases implemented

Annual CPU reports issued

Regular outreach programs conducted for supply community, civil society and media

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ANNEX A – KEY PROCUREMENT REFORMS UNDER THE KPPRP

1. LEGISLATION

• Inconsistent with current international/regional best practices

• Procurement regulations, manual and standard bid documents not developed. Thus, the Act

is incomplete/difficult to understand, resulting in varied interpretation/applications

• Limited application of Sustainable Public Procurement (social, economic and environmental)

• Lack of fairness and transparency in the procurement process

• Procurement is transactional (vs. strategic) and annual procurement planning not mandatory

• Post award contract management principles not addressed

• Conditions not defined where suppliers are not permitted to bid. For example, for criminal

activities, administratively suspended or default in contract performance

• Inadequate process for bidders’ complaints against GoK’s non-compliance with legislation

• Stores and disposal of waste and surplus goods decentralised

• P3s, consulting services, outsourcing, and frame agreements not addressed

• Unfair competition – SOEs bid against private sector

• Selection of methods of procurement not based on value thresholds

• Media for international bid solicitation not defined

• Public bid opening (in current Act) but not conducted

• Terms of reference required for Evaluation Committees, CPRB, MPRC

Annual procurement planning (APP) for all PEs is the most important activity to ensure

procurement moves from ‘transactional’ (buy quickly and use same process/suppliers as before)

to strategic (buy using full technical and supply market knowledge). Planning well ahead of when

the purchase process should start can ensure the most effective strategies are selected. In

addition, APPs support the GoK’s cash flow estimates and, when published provides the supply

community with advance notice of requirements. APP is to be conducted in parallel with the

annual budgeting process.

1.1 Procurement Act and Procurement Regulations: All the above will be addressed in the

new Procurement Act and Regulations and further detailed in working level documents as

described below. While the focus is to be on reforming procurement legislation, a review of all

GoK’s related legislation is required, including in relation to arbitration, whistleblower protection,

corruption, especially bidder collusion offences usually covered under a Competition Act. The

ATG is to address/lead on all aspects related to legislative reform, supported by short term TAs.

1.2 Revised Stores Regulations (collectively termed ‘Inventory Management’): The current

stores Regulations were published in 2011 and require updating. There are several aspects that

interrelate with procurement, for example the store keeping process triggers purchase

requirements. In addition, the disposal of waste, surplus and obsolete materials is the reverse

process of procurement. MFED-IA currently provides support. This will be taken over by the CPU

and it will provide policy support for all aspects of inventory management and operational support

for disposals. PEs will maintain full accountability for storekeeping and approval of bids for

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disposal, etc. Consideration should be given to establishing a value threshold for disposals where

the approval of the CTB is required. CPU TA and CPO to lead in all these reform activities.

1.3 Procurement Manual; A working level document, consistent with the legislation and Standard

Bid Documents (SBDs), (see below) that provides additional guidance and details to practitioners

currently does not exist. A complete procurement manual can only be published upon enactment

of the new legislation. However, drafting should be started as soon as possible and then manual

released once the legislation enacted. CPU TA and CPO should lead in all these reform activities.

1.4 Standard Bid and Contract Documents (SBDs): currently there are a variety of documents

in use by the GoK’s PEs. Some are modelled on the SBDs of the DPs. Sound SBDs are an

essential element of the procurement process. These are the contract terms and conditions that

govern both the pre-award and post- award cycles of the procurement process. SBDs eliminate

the time/cost for development of such for each purchase and provide the supply community with

certainty and familiarity. SBDs reduce the work of the ATG as only contracts that deviate require

ATG’s direct involvement. ATG to lead on these with support from CPU TA and CPO.

2. ORGANISATION AND STAFF Current organisational structures and roles and responsibilities for procurement should be

improved to ensure the most effective use of staff and ‘best value’ from the procurement process

for purchases. Procurement governance is incomplete, including by contract approval entities

(MPRC and CPRB) and by MFED-IA and AG. The Secretary to the Cabinet is currently the CPO

who approves procurement policy deviations, and is the Chair of the CPRB. It is unusual to have

the position of the CPO so high within the government. In addition, the inadequate separation of

duties by combining the policy role, with that of subsequent approval, is not desirable.

The KPPRP organisational changes are to be progressively made, consistent with legislation

enactment and the development of complementary skills and roles of GoK staff. The starting point

is the establishment of the CPU that, together with the CPU-TA and CPO, will lead the KPPRP

implementation. Full details of the organisational changes can be seen in Annexes B-1 and B-2.

2.1 Central Procurement Unit (CPU) – given the relatively small volume of purchases made by

each PE, synergy and ‘best value’ is lost by having decentralised procurement functions in each

PE. Procurement currently within GoK is an adjunct to other roles of accounting and administrative

staff. Decentralisation restricts the growth of expertise and, as a result, full efficiency and

effectiveness is lost. Similarly, inventory management is PE centred without the benefit of

centralised dissemination of best policies and practices.

A CPU is planned to be the GoK’s ‘centre of excellence’ for procurement and inventory

management. The CPU will support the development and interpretation of related policy and

conduct procurement and some aspects of inventory management on behalf of each PE. The

CPU will also conduct all other tasks related to building and professionalising procurement HR

capacity and procurement related systems, procedures, templates and tools, as follows:

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• All purchases over $AUD 10,000. This will include the CPU putting in place consolidated

purchase agreements for all the routine and common purchases of PEs. Similarly, the CPU

will support all PEs for the disposal of surplus and obsolete items.

• While the CPU will support the procurement and inventory management, including disposal,

the PEs will retain accountability for the technical and commercial conditions.

• Purchases under the agreed threshold would still be conducted by each PE in accordance

with the new Act. However, the PEs’ level of effort should be minimal as much of the high

volume/low value purchases will be eliminated by the consolidated purchases made by the

CPU. Should PEs wish they could have the CPU conduct purchases for them below the $AUD

10,000 threshold.

2.2 Procurement Governance: there are currently several levels of procurement ‘governance’

(e.g. Secretary/CEO, SOE Boards, MPRC and CPRB). Plus, for policy deviations there is a

relatively ‘ad hoc’ policy decision making process. Both situations neither ensure ‘best value’ nor

effectively use the limited skills of GoK’s staff. For details refer to Annex B-2.

The new Act will eliminate the lack of clarity of the current Act and, thus, the resulting ‘ad hoc’

policy decisions. Similarly, the key requirement to ensure strategic procurement is that each PE

develop and publish (with the help of the CPU/CPO), accessible to all stakeholders, annual

procurement plans. At the time of developing the plans, major policy deviations can be considered

by the operations and governance structures of GoK.

The CTB is to be established and chaired by MFED, secretariat from CPU and voting members

from the Attorney General, the ministry/SOE requiring the purchase, other members appointed

including temporary membership to ministries and others with technical expertise relevant to the

purchase or other interests in the purchases.

In the short term, the MPRC and CPRB will continue their roles. They require ToRs and training

to better assist them in their activities.

2.3 Bidder Appeal Tribunal (BAT): The objective of the BAT is to increase transparency and

fairness in the GoK’s procurement process, including a venue to table possible corruption

concerns. The current Act goes some way towards this but is not complete. The new Act will

provide for an easy and low-cost forum for dissatisfied bidders (complainants) to seek resolution.

The bidders’ appeal process starts with the entity that conducted the procurement (either the CPU

or PE or both). In the event the complainant is not satisfied with the outcome, it can then go to

the BAT, staffed by persons not directly involved in the procurement process. If still dissatisfied,

the complainant can seek resolution via the courts. Details of the process, including BAT

membership, what can and cannot be appealed, etc., are to be included in the procurement

legislation. Given the expectation that the volume of complaints is generally low, the BAT does

not have to be a permanent body. There are a range of choices for GoK that will be examined as

part of the legal drafting.

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3. SYSTEMS In the longer term GoK should develop a full e-procurement strategy, as summarised in the

following figure.

3.1 Accounting data related to procurement: A sound procurement process requires financial

and procurement management systems to both support control, analysis and audit, and detection

of risks including those of a corrupt nature. Information to be available for a ‘spend analysis’ would

include: what is bought, from whom, when, at what price and what was the method of procurement

(MoP) used, and whether the scope was increased/decreased during contract (if so, how much)

and how did the contractor/supplier perform. Currently the financial management information

systems (FMIS) used are: SOEs - MYOB and the GoK ministries - Attaché. Neither of these

systems produce sufficient data to effectively support procurement. In addition, apart from MHMS

for pharmaceuticals and medical supplies, the procurement process in PEs is still very much

paper based. The ‘spend analysis’ limitations will present some challenges to the KPPRP in the

short term. However, with support from the owner company of Attaché more may be obtained. In

addition, in the longer term, GoK will need to develop more detailed coding to better identify types

of purchases and migrate to full e-procurement.

3.2 E-procurement: GoK has initiated studies to replace Attaché, with the support from ADB.

However, it will take some years before the changeover occurs. During this time, a more detailed

study of GoK adoption of progressive e-procurement should be conducted and include options

for the SOEs, that will likely continue to use MYOB. ADB offers an e-procurement system by In-

Tend UK. Progressive introduction of e-procurement should pace with changes in the MFED

FMIS, the e-business progress in the domestic supply community and the effectiveness of

Kiribati’s internet services.

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3.3 e-portals: currently the GoK’s procurement process is not very transparent. Opportunities to

bid are limited to publication on the radio and newspapers and, in some instances, local notice

boards. Currently, unless bidders ask for contract award information, that is rarely done and there

is nothing published. In the short term, to improve transparency, the website of MFED should be

adopted to publish key procurement documentation and bid opportunities and awards. Similarly,

a range of websites are used by PEs to publicise opportunities requesting international bids. A

standard website should be selected by GoK and all PEs should be required to use it.

3.4 Supplier Database: This is needed to support the procurement reforms. Suppliers wishing to

sell to GoK must submit details about business registration2, scope of supply, address, contacts,

financial details and work completed, etc. All is to be entered on the data base. It is also to be

used to record supplier performance, and identify the suspended/disbarred suppliers. All this

information is used by CPU/PEs to select suppliers for bid invitations or check qualifications of

bidders on open solicitations. In addition, the data base can be used for mailings and contacts to

the supply community about items of interest. It can be an integral part of e-Procurement, but can

also be a standalone spreadsheet.

2 The linkage between the Supplier Database and the GoK’s requirements for business and tax registration. should be investigated This could eliminate duplication of data. In addition, the GoK should determine if its current business registration/ownership process is sufficient to identify ‘beneficial owners’ and thus this information can be used to prevent corrupt or unethical practices in relation to public procurement.

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ANNEX B-1 PROPOSED PROCUREMENT ORGANISATION CHART

SECRETARY

MFED

MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT

NEPO

INTERNAL

AUDIT

KIRIBATI

FIDUCIARY

SERVICES

UNIT

ACCOUNT/

FINANCE

CENTRAL

PROCUREMENT

UNIT (CPU/CPO)

DEVELOPMENT

PARTNERS’

PROJECTS

Procurement and Inventory - Operations (2 – GoK staff)

Procurement and Inventory – Regulatory

(2 - GoK staff)

OTHERS

e.g.

IT, Tax

Statistics,

etc

• Lead PE annual procurement planning

• Member of Evaluation Committees

• Contract for commonly used purchases

• Conduct purchases of $10K for PEs

• Conduct lesser value on PEs’ request

• Disposes of PEs surpluses

• Employs, as req’d, external procurement TAs

• Provides Secretariat support to CTB

• Procurement and inventory policy draft/advice

• Maintenance of policy docs

• Develop/maintain e-systems

• Manage Supplier Data Base

• Arrange education/training of GoK staff

• Conducts ‘outreach’ to external stakeholders

• Annual procurement reports/statistics/KPIs

Procurement

Finance

CENTRAL TENDER

BOARD (CTB)

BID EVALUATION

COMMITTEES

PROCURING ENTITIES

(PEs – ministries and

SOEs)

KIRIBATI &

INTERNATIONAL

SUPPLY COMMUNITIES

John Brooks – Rev 2 – JUNE 5/17

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Current policy per 2002 Act Proposed policy

Procuring

entity (PE)

Contract

value

Policy deviation

approval

Contract Award

Approval

Procuring entity

(PE)

Contract

value

Policy deviation

approval

Contract Award

Approval

Ministry <$5,000 PE Sec PE Sec Ministry <$10,000 PE - Sec PE-Sec

SOE <$5,000 PE- CEO PE CEO SOE <$10,000 PE - CEO PE - CEO

Ministry <$50,000 PE - Sec MPRC Ministry <$50,000 CPO CTB

SOE <$50,000 PE- CEO SOE Board SOE <$50,000 CPO CTB

Ministry >$50,000 CPO CPRB Ministry >$50,000 CPO CTB

SOE >$50,000 CPO CPO/CPRB SOE >$50,000 CPO CTB

NOTES

1. The value thresholds above are defined in the Act.

2. There are no value thresholds dictating the related default

Method of Procurements. (MoPs) Thus, policy deviation requests

likely based on precedent vs. policy

3. For major purchases, i.e., over $50,000 there is not a

separation of duties as CPO authorises policy deviation and then

is Chair of CPRB that approves purchase. In addition to the two

roles, the CPO/Chair is the Secretary to the Cabinet (highest level

civil servant).

At this moment, there is no other oversight on procurement.

Neither MFED-Internal Audit (IA) nor the AG conduct audits of the

procurement history (pre-award) or post award (including for

contractor compliance) against the Act nor if ‘VfM’ was achieved.

NOTES

1. Value thresholds shown here are ‘suggested’ Thus, they could

start low (risk management strategy) and be progressively increased

as CPU and GoK’s procurement process builds capacity.

2. Separation of duties applied to the above i.e. CPU that performs

procurement services for the PE is not the approver of contract

award for such. The same is for policy deviation made by CPO

3. Instances for ad hoc policy deviations will be reduced based on:

(a) Default MoPs will be clearer in Regulations by assigning value

thresholds to each; (b) APP will identify in advance where policy

deviation required. Thus, all persons/stakeholders that review can

provide comments.

4. CPO is Head of the CPU. The CPU provides only Secretariat

support to the Central Tender Board (CTB).

5. AG to start procurement VfM audits 2018; MFED-IA to start also

in 2018

CPO – Chief Procurement Officer; CPRB: CPRB - Central Procurement Review Board; CPU – Central Procurement Unit

KOAG: Kiribati Office of Auditor General: MoP: Method of Procurement: MPRC: Ministry Procurement Review Committee

ANNEX B-2 CURRENT AND FUTURE GOVERNANCE FOR CONTRACTS

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ANNEX C STAKEHOLDERS IN THE KPPRP

The KPPRP will directly concern the following internal and external stakeholders:

1.0 Stakeholders within GoK

1.1 MFED: Has overall responsibility for the KPPRP, chairs the KPPRP-SC and will be the locus

for the integrated CPU. In addition, the MFED Internal Audit, (MFED-IA) applicable does not

currently audit pre-and post award procurement activities of all PEs. This should be introduced

under the KPPRP. Currently MFED-IA is in addition responsible for policy for stores/inventory

management and supports PEs in the disposal process. This activity is to move to the CPU. The

Accountant General will be involved in providing support to CPU via Attaché for ‘spend analysis’

and will be the GoK point on any new FMIS to be acquired. With CPU help, consideration should

be given to incorporating e-Procurement in the new FMIS.

1.2 Procuring Entities (PEs): Initially they will be supported by the CPU for the consolidated

purchase of common requirements. As the CPU builds capacity, it will take over for all PEs the

procurement and inventory management support. This will be progressive as the CPU gathers

strength. However, consistent with their legislated fiscal and operational responsibilities, PEs will

retain such rights in the procurement and inventory management process.

1.3 Auditor General (AG): Currently the AG does not conduct audits of VfM for purchases. This

would include assessing that, in addition to compliance with policy, practices, etc., the best value

and VfM was obtained. This scope is now planned to be part of the AG’s work, starting in 2018

(based on PEs’ 2017 activities). Staff are in place but will need TA and training to address

procurement scope.

1.4 Attorney General (ATG): Lead on the drafting of procurement legislation, regulations and

the terms and conditions for SBDs. Short term TA support will be required to develop new

procurement legislation and related documents. Where possible, this work should be scheduled

to involve staff of the CPU and build their capacity by involvement.

As part of the KPPRP, the ATG has been requested to examine current GoK legislation, or the

need for new, to ensure coverage of such aspects, related to public procurement including:

ensuring ‘beneficial owners’ of GoK’s suppliers can be easily identified (company registration),

prevention of price fixing and collusive bidding (usually addressed in legislation governing

‘Competition’) and ‘whistleblower’ and ‘freedom of information’ legislation.

1.5 Leadership Commission/Anti-Corruption (LC): In September 2013, Kiribati acceded to the

UN Convention Against Corruption (UNCAC); it has yet to ratify. However, in 2015, Kiribati was

included in a UNCAC sponsored review and the report was published “The Pacific’s

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Implementation of Chapter III of the UNCAC”3. This noted anti-corruption changes that were

required that in part are addressed in the “Leaders Code of Conduct Act 2016” receiving assent

in January 2017. A ‘Leadership Commission’ (LC) is to be established with responsibilities

including those related to investigating unethical and corrupt practices by senior civil servants,

members of the judiciary, politicians and senior appointees in local governments. This Act goes

a long way to support GoK’s anti-corruption focus for public procurement. The LC members will

require some training, relative to the new procurement legislation, to support them in their roles.

1.6 Ministry of Commerce, Industry and Co-operatives (MCIC): A more aggressive policy is

required to support GoK’s sustainable public procurement (SPP) policies incorporating

environmental, social and economic considerations. MCIC must be consulted to ensure GoK’s

public procurement policies support the domestic micro, small and medium enterprises (MSMEs).

In addition, MCIC should address the business environment deficiencies identified in the 2015

World Bank ‘Doing Business’ in Kiribati.

Other Ministries may also need to be consulted in the SPP policies, – for example Environment,

Lands and Agricultural Development.

1.7 Ministry of Justice: The Ministry of Justice is to ensure the judiciary is aware of new

procurement legislation, etc.

1.8 Ministry Procurement Review Committee (MPRC): Until legislated changes are in place,

the MPRC will continue its role of evaluating and approving purchases for Ministries, with a value

between $AUD 5,000 and $50,000. In the interim, as ToRs do not exist for this function, they

should be drafted and MPRC members receive training to develop their capacities. The ToRs

should also address the bid evaluation activities supported by the MPRC.

1.9 Central Procurement Review Board (CPRB): Like the MPRC, the CPRB will continue its

roles until new legislation is enacted. In addition, ToRs and some training are required to assist

all members to develop their capacities. The ToRs should also address the bid evaluation

activities supported by the CPRB.

2.0 External Stakeholders

2.1 Supply Community: There will be a range of changes most favourably impacting the supply

community including:

• To learn in advance what is to be bought (via published annual procurement plans)

• Clear and easily accessible procurement legislation, policy and procedure documents

3http://www.unodc.org/documents/corruption/Publications/2016/Pacifics_Implementation_of_UNCAC_Ch

apter_III.pdf

http://www.unodc.org/documents/corruption/Publications/2016/Pacifics_Implementation_of_UNCAC_Chapter_III.pdf

http://www.unodc.org/documents/corruption/Publications/2016/Pacifics_Implementation_of_UNCAC_Chapter_III.pdf

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• Guidelines on how to register and qualify to bid

• More accessible publications of bid opportunities and bid award via e-portal/web page

• Policies to assist Kiribati’s MSMEs

• Access to Bidder Appeal Tribunal

• Attend outreach programs to better understand GoK’s procurement process

Training/outreach programs are to be conducted to ensure that the domestic supply community

is kept fully informed as the KPPRP progresses. In part, this will be supported by including a

member from Kiribati Chamber of Commerce and Industry on the KPPRP-SC. Regular updates

on progress on KPPRP should be included on the MFED e-portal and on the selected website for

international bid solicitation.

The most immediate area for the domestic supply community involvement is in GoK’s plans to

consolidate ‘common’ purchases that are currently purchased by several PEs. Each purchase

category will need to have specific procurement plans/strategies developed. This must be done

in conjunction with market assessments to develop an approach that will give the domestic supply

community time to adjust to changes.

2.2 Media/Civil Society: Kiribati’s civil society with a focus on procurement4 is currently very

limited. However, it and the media have important roles to play in monitoring, and in the case of

media, reporting on public procurement activities of interest. However, to do this, these two

stakeholders will need to be well informed about the KPPRP and what resources are available to

them. These stakeholders should be included in the procurement outreach programs.

2.3 Public Accounts Committee: In its oversight role, this committee will need to be brought up

to speed on the KPPRP and new legislation.

2.4 Parliamentarians: Will require briefing on planned legislated changes. This will help them in

their deliberations on the Procurement Bill and, although proposed changes are positive (refer

section 2.1 above), in their dealings with their constituents/suppliers on the impact of the changes.

2.5 Development Partners: Funding, sharing regional training, educational and other initiatives,

supporting growth/capacity.

4 March 2017 – “Kiribati launches new anti-corruption group. A group of private citizens have launched a new advocacy group called Kiribati Citizens Against Corruption (KCAC). For more information, contact Ngatau Neneia (Mr.), founder and interim executive director, at [email protected] or at mobile # + 00 686 73044358. [source: http://newsbin-apintact.blogspot.ca/2017/03/pacific-anti-corruption-updates-3-march.html].” - The Asia – Pacific Integrity in Action Network (supported by: UNDP, Government of Australia and UN Office on Drugs and Crime)

mailto:[email protected]

http://newsbin-apintact.blogspot.ca/2017/03/pacific-anti-corruption-updates-3-march.html

http://newsbin-apintact.blogspot.ca/2017/03/pacific-anti-corruption-updates-3-march.html

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2.6 Regional groupings/Neighbouring States: Many of Kiribati’s neighbouring island states

face the same challenges, including limited supply markets, remoteness from international

suppliers, small domestic demand and in the in-progress development of sound procurement

systems and procurement professionals. Kiribati should look to learn from these states by study

visits, regional procurement training and education – for example on-line procurement courses

offered by the University of the South Pacific. Similarly, some consideration could be given to

advantages from consolidating purchases with these states.